Political Money

By November 26, 2013 Uncategorized No Comments
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Money, politics, and crime are the main elements of power struggles in any society.1

If you don’t understand money, you can’t really understand politics. Money intersects with politics by: (1) Funding campaigns, party building and lobbying; (2) Purchasing election equipment and supplies, and paying for election technicians and staff; (3) Pricing election disputes and election recounts, affecting whether remedies are accessible to persons of ordinary means; and (4) Procuring illicit political activities. Illicit acts typically cause an amount of money to drop out of sight (money laundering).

RIGHTS AND POLITICAL MONEY

Underlying human rights:

– Right to sovereignty (“the people own the government”);
– Right to equality

– Right to freedom of information

Rights and money in politics:

– Right to honest services

– Right to financial accountability in government

WHY FOLLOW THE MONEY?

There is usually an interweaving of financial shenanigans and political machinations.” — Raymond W. Baker2

Pretty much everything in politics is really about money. Money delivers elections. Elections deliver political position. Political position controls public funds. Election results drive economic policy.

Following campaign money tells us who empowers candidates (and who they owe). Following election administration costs can show whether new systems are cost-effective and whether remedies like recounts have become inaccessible.

If a democratic government’s deepest purpose is “to represent, channel, protect, and execute the public interest,”3 then if money — especially hidden money — manages to replace public choice, the very purpose of democracy is defeated.

TRENDS

Though rationales for political finance regulation are surprisingly consistent worldwide,4 regulatory trends fluctuate, with variant emphases on public vs. private political funding; on various disclosure requirements; on enforcement priority, and on weighting of equality rights vs. free speech rights.

What offers great hope is the Internet, which steadily increases access to political funding data, and extraordinary new tools being developed by clever citizens all around the world to make data more easily findable.5

Technology salesmen, a brisk bunch that seem to have arrived with hands out and leaky pockets — have been promising modernization in exchange for a few million, or billion, in taxpayer funds — greasing middlemen along the way, whose work not infrequently needs to be redone or discarded altogether (except sometimes it turns out they didn’t actually do any work); and finding flaws in their own products requiring, of course, additional rounds of procurement. Technology is indeed here to stay, but perhaps bureaucratic smarts aren’t ideally suited to the task of evaluating its most appropriate uses and costs. So far, technology has increased election costs while reducing election transparency, requiring staggering capital expenditures followed by annual licensing fees, nonstop technical support, and relatively frequent equipment replacements due to obsolescence. As costs for elections rise, some elections get eliminated altogether.

Excessive costs are eroding access to recounts and election disputes (legal contests) putting political remedies out of reach for persons of average means.

Direct democracy-style ballot measures like citizen initiatives and ballot propositions offer even broader bandwidth to those with financial prowess. Such measures typically affect someone’s profit or loss, beckoning corporations to target ballot propositions and, because such direct intervention in public policy creates blowback, business groups (never as ethically encumbered as public officials) seek ways to hide their identities.6

BACKGROUND ON POLITICAL MONEY

The term “campaign finance” omits much about money’s impact on politics; a broader term, “political finance,” better captures money’s interactions with elections, party platforms, lobbying and procurement.

Public vs. private financing of campaigns and political parties

Enormous pressures drive politicians to raise money, sometimes with bankrolls so fat that candidates, and even their accountants, have been unable to resist tucking some of it away for personal use. Candidates unable to collect a big enough bankroll may find it impossible to win a campaign. Political funds can come from public financing, private persons, corporations, personal funds, or even criminal enterprise.

Competing views favoring public or private political financing revolve around two basic issues: Conflicting political ideologies (laissez-faire vs. equality); and concerns about corruption.

Political ideology: While both laissez-faire and equality camps believe their position supports justice, laissez-faire advocates emphasize justice as upholding voluntary choices, whereas equality proponents believe distributed power improves fairness.7 Neither camp advocates corruption, and both camps believe in “one person = one vote” as an essential equality. Laissez-faire ideology favors private political funding, sometimes non-disclosed, whereas equality proponents find public funding more attractive.

Many Latin American and some European countries provide public political funding, Some governments fund political parties but not candidates; support can also include free media time, postage, or campaign material subsidies. Typically, qualifying for public funding requires some level of proven achievement.

Private funding systems have made varied policy decisions about donation caps and whether to permit corporate, union, or bundled money.

Anti-corruption: Public funding may reduce corruption. However, if only public funding is permitted, financial pressures may outstrip permissible public resources, creating a powerful underground market for funds. For this reason, some countries use a combination of public and private political money.

Unrestrained political spending encourages corruption. Money’s influence can produce corporate steering, but worse: Crime cartels, nowadays diversified and multinational, have access to vast financial resources and they, too, face political imperatives. Political inequality can become devastating when it involves criminal enterprise.

Disclosure and enforcement help mitigate corruption for private political funding systems.

– Donor disclosure typically requires donation date, amount, and donor’s address and employer, and includes both cash and non-cash (“in kind”) donations.

– Personal financial disclosure for public officials typically requires reporting of personal and spousal assets, the value of each, yearly changes, a two-year employment history, and reporting of any work done privately while in office.

Besides disclosure for campaigns and parties, transparency as an anti-corruption measure should require:

– Lobbying reports, which typically disclose lobbying firm, lobbyist, client name, lobbying issue, and amount spent.

– Procurement disclosures, which should require company name, contract, services provided, identification of subsidiary/corporate parentage, owners and management names, and financial details.

More on justice and equality issues

Contribution restrictions help with equal access to the political process. In capitalistic systems there is no expectation of equality in personal assets. But government is a shared asset, not a personal asset.

In a free society, we don’t disapprove of wealth. We don’t object to success. But we do feel outrage if we perceive that our share in our own government is being poached by predators. Unfettered political spending by a dominatrix elite, especially intolerable if we can’t see their names, promotes neither justice nor freedom because it allows monied elites to place public officials into bondage, displacing our ability to control our own share in government.

The capture of parties and elected officials by moneyed interests is bad news for democracy in the best of cases. At a minimum, it compromises the premise of political equality that supports the whole edifice of democracy, reflected in the principle of one person, one vote, and stunts the ability of parties and leaders to channel their efforts toward meeting broader social demands. Such a loss of political autonomy is serious…” — Kevin Casas-Zamora, former vice president of Costa Rica 8

Donations from the multitudes enhance political participation, binding public officials to a greater part of the whole. If you get 100,000 people to donate $25 each, you raise $2.5 million while engaging 100,000 people in learning about political issues. You encourage 100,000 people to turn out and vote. You are beholden to represent 100,000 people. But why engage 100,000 people at $25 each if you can have a single $2.5 million donation from just one person? If the underpinning for candidates is a handful of mammoth wallets, you will hear “my vote doesn’t count” and “they don’t represent us.” Unregulated political finance disengages the public from its government.

The two [US] parties and the constituency and interest groups that support them have used various methods to circumvent legal restrictions on campaign spending, and the Supreme Court on several occasions has struck down such restrictions, finding that they violated free speech rights. … In general, candidates with a financial advantage are more likely to prevail.” — Freedom In the World Report 2013 9

Citizens United10 the controversial US Supreme Court decision which prohibits restriction on political expenditures, failed to balance or even acknowledge conflicts between free speech rights and political equality rights, and also failed to imagine money’s connection with corruption.

Election Costs

When election costs rise, governments sometimes avoid elections or cut back on polling places; sometimes they dip into general funds (designed for other purposes, like emergencies); or start price gouging on public records; they may cut back on staff, causing election logjams.

Election technology costs for software, hardware, training, and surprisingly frequent equipment replacement, can topple both voting rights and local budgets.

Not just voting machines: Once you glam up elections with voting machines, you need to build network systems, communications lines, and inventory tracking systems; add vote-by-mail and you simply must accessorize with ballot printing technologies, advanced mail processing equipment and video surveillance systems; your voter registration list soon gets together with electronic pollbooks, and don’t forget the latest steps: public education, insurance, security, markedly increased transportation expense, ballot facilities, and equipment warehousing.

Central locations manage complex and costly election technologies, removing local control. Municipalities may have to ask counties to administer elections and counties may refuse to do it. Due to expense, everything gets crammed onto one complex ballot, or elections are avoided by appointing officials instead of electing them.

Unfortunately, when election costs increase, public transparency usually decreases.

Pricing legal contests and election disputes

Healthy democracies offer remedies for election questions, recounts and legal contests (US terminology), or election disputes (international terminology). Despite unenlightened media comments we see now and then, recounts and litigation are not for “sore losers” and do not “throw the system into chaos,” but instead provide a vital democratic safeguard.

Recount cost discrepancies invite favoritism. Election officials should justify all recount fees, with appropriate supporting documentation, providing accurate cost quotes in advance with no surprises afterwards. Costs must stay consistent from candidate to candidate.

Irregularities like impossible numbers (for example, more votes than voters), or missing ballot boxes, or wrong names on ballots, are remedied through election disputes through the judicial system. Excessive litigation costs make remedies inaccessible except for heavily funded candidates, even when irregularities produce “incurable uncertainty” — that is, when breaches in election accounting make it impossible to get any reliable confirmation of results.

Litigation may be the only available remedy for withholding voting rights (like ballot privacy and right to vote). If wrongfully denied citizens do manage to raise litigation funds, costs might not be recoverable even after winning. Requiring lawsuits to enforce rights is unjustifiable, and becomes intolerable if legal costs can’t be recovered after winning the case. Some locations provide no legal basis for recovering expenses; sometimes courts refuse to order restitution; and sometimes, even when a court awards reimbursement, the government refuses to comply.

Lack of affordable, consistent, accessible, and reimbursable remedies, combined with nontransparent elections, ultimately will create disdain for voting processes.

Procuring power

Money should not displace public choice to buy political power, but sometimes it does. This is nothing new; it hasn’t gone away; it probably never will; and it isn’t just that guy over there, it’s us, too.

1880 USA, Australia: “This sounds like exaggeration, but it is truth; and these are facts so notorious that no one acquainted with the conduct of recent elections now attempts a denial — that the raising of colossal sums for the purpose of bribery has been rewarded by promotion to the highest offices in the government; that systematic organization for the purchase of votes, individually and in blocks, at the polls has become a recognized factor in the machinery of parties; that the number of voters who demand money compensation for their ballots has grown greater with each recurring election.”11

1904, USA: “Because politics is business. That’s what’s the matter with it … The politician is a business man with a specialty. The typical [small] business man is a bad citizen; he is busy. If he is a “big business man” and very busy, he does not neglect, he is busy with politics, oh, very busy and very businesslike… I found him buying boodlers in St. Louis, defending grafters in Minneapolis, originating corruption in Pittsburg, sharing with bosses in Philadelphia, deploring reform in Chicago, and beating good government with corruption funds in New York. He is a self-righteous fraud, this big business man. He is the chief source of corruption, and it were a boon if he would neglect politics.” — Lincoln Steffens12

2013, New York: Sen. Malcolm Smith, D-Queens, was at the center of a massive bribery scandal to get the Republican nomination for New York City mayor … Smith, a member of the Independent Democratic Conference, arranged for $40,000 to be paid to Vincent Tabone and Joseph Savino, two New York City Republican county leaders. Then New York City Councilman Charles Halloran received about $20,500 in cash bribes to act as an intermediary with Tabone and Savino on Smith.” 13

2013: Latin America, Europe: “Investing in politics is a natural step for an industry that, to thrive, requires weak law enforcement and a measure of control over crucial public institutions … Helping to elect friends who can open doors and peddle influence through the state apparatus is often more efficient than other methods, such as bribery, blackmail, and threats of violence. Even for drug traffickers, the old rule applies: violence is not a sign of strength but of weakness. Better the softer approach.” 14

Passing laws doesn’t eliminate theft of power, but good anti-corruption laws, combined with adequate funding enables prosecution by independent investigative authorities. Enforcement and public transparency remain the most powerful antidotes to procurement of power through wealth, bribery, or other illicit means.

Money laundering

Understanding political money involves learning about illicit money too, including a basic understanding of money laundering.

Legitimate money stays on the books; it may travel from place to place, but always with a clearly marked path. Money behaving badly, however, drops off the books. Of course even when out of view, money never disappears. It may flow underground, shift channels, or combine with other money making it difficult to differentiate. But it doesn’t disappear. Money always parks somewhere and if you can’t see it, you have a red flag for corruption.

A money laundering variation is rule laundering. As money travels through the pipeline, it follows rules set up by specific bodies. Campaign money is subject to oversight from bodies like the Federal Election Commission, state fair practices commission, or national electoral council. Money for purchasing has to follow procurement rules. “Laundering the rules” means finding a way to transfer activities, at least temporarily, to another authority with different rules.

The average Joe finds complex accounting less than fascinating. Even law enforcement, juggling multiple cases, may deprioritize a case if unraveling the scheme requires mastering “a forest of laws, bureaucratic procedures, regulations, documents, plans, contracts, resolutions, and ordinances.15. Sometimes laundering is imagined as skilled lawyering, helping malfeasance cloak itself in technicalities, or, as Enron whistleblower Sherron Watkins describes it, “notionally legal but ethically and morally bankrupt.” 16

It didn’t matter that I believed my actions were for the good of my clients; they were wrong — I was wrong. Moreover, not only were some of my actions illegal, many of them were corrupt despite their legality.”– Jack Abramoff 17

Money laundering tactics:

– False invoices; may use a series of falsely priced transactions;
– False bids: Dummy bids for the “losing” efforts; or bids solicited from hidden subsidiaries of the same firm masquerading as unrelated entities;
– Pass-through payments: Money goes from A through B and from B to C. The pass-through entity — “B” — may be a small corporation, consultant, family member, separate candidate or political group; the pass-through usually takes a cut;
– Structuring: Illegally-large payment broken up and delivered through several connected sources, or divided into deposits on different dates;
– Patronage: Paid public positions for persons who may or may not do any work;
– Funds provided privately declared by candidate as “personal” money;
– Use of dummy corporations or dummy bank accounts;
– Transactions in secrecy havens (locations that refuse to comply with bank transparency measures);
– Co-mingling funds without showing documentation to unravel the knot;
– Asset procurement using cash; popular items include cars, boats, motorcycles, vacation time share condos;
– Real estate acquired in other states or countries;
– Lifestyle purchases: Luxury travel, party boats, strippers, gambling junkets, sportsman excursions, and gifts like laptops, liquor and home repairs.

* * * * *

“Show me the money” is not just for professional athletes, salesmen, and investment bankers. Democracy does not, can not work unless public officials show us all the money, and we learn how to look at it and what questions to ask.

Concepts:

Freedom of Information (FOI laws) – allow public access to data held by government, to be received freely or at minimal cost, barring standard exceptions. Also called open records or sunshine laws. Governments are bound by a duty to publish and promote openness. Wikipedia link: http://en.wikipedia.org/wiki/Freedom_of_information_laws_by_country

NOTES:

 

  1. Delia M. Ferreira Rubio “Argentina: Two Cases” in Casas-Zamora, Kevin (ed.): Dangerous Liaisons: Organized Crime and Political Finance in Latin America and Beyond. Washington D.C.: Brookings Institution Press 2013 ISBN 978-0-8157-2529-9
  2. Baker, Raymond W., Capitalism’s Achilles Heel: Dirty Money and How to Renew the Free-Market System. Hoboken, New Jersey: John Wiley & Sons, Inc., 2005 ISBN 978-0-471-64488-0
  3. Kevin Casas-Zamora, “On Organized Crime and Political Finance: Why Does the Connection Matter?” in Casas-Zamora, Kevin (ed.): Dangerous Liaisons: Organized Crime and Political Finance in Latin America and Beyond. Washington D.C.: Brookings Institution Press 2013 ISBN 978-0-8157-2529-9
  4. Ibid.
  5. See, for example, the work done by the Sunlight Foundation, as described in Newsom, Gavin & Dickey, Lisa: Citizenville: How to Take the Town Square Digital and Reinvent Government (p. 27-28). New York, US: Penguin Group US. (2013) ISBN 978-1-101-60581-3
  6. For example, see political money laundering in connection with a successful industry effort to defeat a food labeling initiative: Connelly, Joel: “Big money helps defeat food labeling initiative, but fight not over”: Post-Intelligencer, 11/05/2013, http://blog.seattlepi.com/seattlepolitics/2013/11/05/initiative-522-money-speaks-but-doesnt-get-last-word/
  7. Sandel, Michael J.: Justice: What’s the Right Thing to Do? (p. 20). New York, US: Farrar, Straus and Giroux (2009) ISBN 978-1-429-95268-2
  8. Kevin Casas-Zamora “On Organized Crime and Political Finance: Why Does the Connection Matter?” in Casas-Zamora, Kevin (ed.): Dangerous Liaisons: Organized Crime and Political Finance in Latin America and Beyond. Washington D.C.: Brookings Institution Press 2013 ISBN 978-0-8157-2529-9
  9. Freedom House: Freedom in the World 2013 (USA, p 741). New York, US: Rowman & Littlefield (2013) ISBN 978-1-4422-0122-4
  10. Citizens United v. Federal Election Commission, 558 U.S. 310 (2010), is a US constitutional law case, in which the United States Supreme Court held that the First Amendment prohibits the government from restricting political independent expenditures by corporations, associations, or labor unions. The conservative lobbying group Citizens United wanted to air a film critical of Hillary Clinton and to advertise the film during television broadcasts in apparent violation of the 2002 Bipartisan Campaign Reform Act (commonly known as the McCain-Feingold Act or “BCRA”). In a 5-4 decision, the Court held that portions of BCRA sec. 203 violated the First Amendment: http://en.wikipedia.org/wiki/Citizens_United_v._Federal_Election_Commission
  11. Quoting James Lindsay Gordon, The Protection of the Suffrage, as described in Evans, Eldon Cobb: A History of the Australian Ballot System in the United States (Chapter 1). Chicago, US: The University of Chicago Press (1917) http://archive.org/details/ahistoryaustral00evangoog
  12. Steffens, Lincoln Shame of the Cities (p. 5): Balefire Publishing (1904) Amazon Digital Media ASIN: B009V3F7M8
  13. Joseph Spector: Bribes fly in Smith corruption case, Albany Watch, 04/02/2013, http://statepolitics.lohudblogs.com/2013/04/02/bribes-fly-in-smith-corruption-case/
  14. Kevin Casas-Zamora, “On Organized Crime and Political Finance: Why Does the Connection Matter?” in Casas-Zamora, Kevin (ed.): Dangerous Liaisons: Organized Crime and Political Finance in Latin America and Beyond. Washington D.C.: Brookings Institution Press 2013 ISBN 978-0-8157-2529-9
  15. Valle, Victor: City of Industry: Genealogies of Power in Southern California (p. 141). New Jersey: Rutgers University Press (2009) ISBN 978-0-8135-4573-8
  16. Sherron S. Watkins, former Enron Corporation Vice President and one of the trio of whistle-blowers named Time magazine’s 2002 Persons of the Year, as quoted in her praise for Baker, Raymond W.: Capitalism’s Achilles Heel: Dirty Money and How to Renew the Free-Market System. New Jersey, US: John Wiley & Sons, Inc. (2005) ISBN 978-0-471-64488-0
  17. Abramoff, Jack: Capitol Punishment: The Hard Truth About Washington Corruption from America’s Most Notorious Lobbyist

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